Porsche 2009 Annual Report Download - page 162

162 Financials
Provisions for pensions and similar obligations
In accordance with IAS 19, the actuarial measurement of pension obligations arising from
defined benefit plans is based on the projected unit credit method. This method considers not only
the pension payments and the future claims known on the reporting date but also future anticipated
increases in salaries and pensions. The calculation of pension obligations is based on actuarial
expert opinions taking into account biometric assumptions. The interest rate used to discount pro-
visions is determined on the basis of the return on long-term high-quality corporate bonds at the
reporting date.
If pension obligations are funded by plan assets the obligation and the assets are offset.
The company applies the corridor method to measure the pension obligations and determine the
pension cost. Actuarial gains and losses from a pension plan are recognized as income or expense
when the net cumulative unrecognized actuarial gains and losses of the plan exceed 10% of the
defined benefit obligation or 10% of the fair value of existing plan assets of the prior year. The
amount exceeding the corridor is recognized by allocation to the average remaining working lives of
the employees. Past service cost is recognized on a straight-line basis over the average period until
the benefits become vested. To the extent that the benefits are already vested immediately follow-
ing the introduction of, or changes to, a pension plan, past service cost is recognized immediately
in profit or loss. Service cost is presented as personnel expense while the interest expense of the
obligation and return on plan assets are presented in finance costs.
Other provisions
Other provisions are recognized if a past event has led to a current legal or constructive
obligation to third parties which is expected to lead to a future outflow of resources that can be
estimated reliably. Provisions are generally measured at the expected settlement amount taking into
account all identifiable risks. The settlement amount is calculated using best estimates, including
estimated cost increases.
Provisions for warranty claims are recognized taking account of the past or estimated fu-
ture claims pattern. Non-current provisions are stated at their present value at the reporting date.
The interest rate used is a pre-tax rate that reflects current market assessments of the time value
of money and the risks specific to the liability. The expense resulting from the unwinding of the
interest rate is presented in finance costs.
Provisions resulting from insurance contracts are accounted for in accordance with the
provisions of IFRS 4. Reinsurance acceptances are accounted for on an accrual basis. Provisions
for claims are determined using estimation techniques based on assumptions on the further devel-
opment of claims.